CMS Proposes Outpatient Payment Update

A cut in outpatient payment rates as well as changes to conversion rates

WASHINGTON -- The Centers for Medicare and Medicaid Services released a plan for reimbursing hospitals and ambulatory surgical centers starting in 2016 on Wednesday. Proposed changes include a reduction in outpatient payment rates as well as updating Medicare's conversion rate in the physician payment schedule.

CMS suggested a decrease of 0.1% for outpatient payment rates. "The change is based on the projected hospital market basket increase of 2.7 percent minus both a 0.6 percentage point adjustment for multi-factor productivity and a 0.2 percentage point adjustment required by law," explained an agency fact sheet. An additional 2 percentage point increase will be included to account for inflation in OPPS payments to an increase in payments for laboratory tests.

CMS also suggested updates to the conversion factor by 2%. The conversion factor is defined by the American Medical Association as a means of gauging "the geographically adjusted number of relative value units (RVUs) for each service in the Medicare physician payment schedule into a dollar payment amount." According to the agency, in 2014, CMS overestimated the use of laboratory test packaging by about $1 billion. Consequently, the agency decided to reduce the conversion factor.

The agency also suggested the following adjustments:

Restructuring ambulatory payment classifications: The agency "proposes to restructure, reorganize, and consolidate many APCs." The change would reduce the number of APCs within the nine APC categories and would impact surgical and diagnostic procedures.

C-APCs for Comprehensive Observation Services: The agency has suggested developing a C-APC for an observation service categorized as "non-surgical encounter with a high level outpatient hospital visit and 8 or more hours of observation."

Packaged services: In 2015, CMS packaged many ancillary services into primary care. For 2016, the agency is contemplating "conditionally packaging" a few more ancillary services such as minor procedures and pathology services, as well as packaging payment for a few drugs used in surgeries.

Device Pass-through Process: The Agency reviews pass through payment for new medical devices and will continue to do so four times each year. It has proposed a "newness criterion" for device applications. Any device that needs FDA approval would be deemed new.

Partial Hospitalization Programs: CMS is suggesting a new payment method to address "aberrant costs" and rates for outpatient programs providing mental health services, in lieu of inpatient psychiatric hospitalization or as a transition option to reduce inpatient visits.

In addition to these proposed changes CMS plans to reduce payment 2.0 percentage points to outpatient hospitals' OPD schedules that failed to meet the Hospital Outpatient Quality Reporting (OQR) Program requirements. The agency plans to reduce Ambulatory Surgical Centers' (ASCs) annual payment by the same amount for failure to meet similar reporting requirements.

CMS also said it planned to slightly revise the "2-midnight rule," which states that most inpatient hospital stays will be paid for as long as they are expected to span more than two midnights.

In the proposed rule, CMS said it will "allow exceptions to the 2-midnight benchmark to be determined on a case-by-case basis by the physician responsible for the care of the beneficiary, subject to medical review." The agency added, however, that it continues "to expect that stays under 24 hours would rarely qualify for an exception to the 2-midnight benchmark."

The agency also said that starting no later than Oct. 1, it will have quality improvement organizations review short inpatient stays instead of Medicare administrative contractors.

Last year's rule established a plan to better reimburse providers caring for patients with multiple chronic conditions including non-face-to-face services.

That plan has sparked some criticism from confused providers. For 2016, CMS plans to address hospital's role in chronic care management.

CMS will review comments on the proposed rule until Aug. 31.

Reviewed by Robert Jasmer, MD Associate Clinical Professor of Medicine, University of California, San Francisco